General Electric Co shares climbed 5 percent on Thursday after a powerful U.S. lawmaker suggested a planned financial regulatory overhaul would not force the largest U.S. conglomerate to spin off its hefty finance arm.

Goldman Sachs raised its rating on the shares to buy on the news.

Bloomberg News reported that U.S. Rep. Barney Frank said in an interview that GE's ownership of GE Capital was not part of the problem that caused the financial crisis.

Frank's office could not be reached for immediate comment.

Many investors had feared that the Obama administration's planned overhaul of the system could compel Fairfield, Connecticut-based GE to spin off the finance unit. That business over the past year has become the company's Achilles heel, and GE management was working to downsize it in the face of falling profits.

GE shares rose 58 cents to $12.84 in premarket trading.

Greater potential for a manageable regulatory outcome should prompt investors to focus on longer-term benefits of economic and credit stabilization to GE shares, Goldman Sachs analyst Terry Darling wrote in a note to clients. Goldman raised its target price on the shares to $15.

Deutsche Bank analyst Nigel Coe took a more measured view on the news, calling it a modest positive while noting that significant risks persist at GE Capital.

GE officials have repeatedly said they would resist any attempt to force them to spin off GE Capital. Brackett Denniston, the company's general counsel, told a Tuesday investor briefing that he believed this forced break-up idea is increasingly unlikely to be adopted as part of this total and very complex financial reform package.

(Reporting by Scott Malone, editing by Maureen Bavdek)

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